Discover how to minimise your tax whilst maximising profits in the financial year ahead.

1. 7 WAYS TO BOOST CASH
FLOW & MAXIMISE
PROFITS
By Bryn Harwood

2. TOPICS
 Understanding Your Financial Statements
 Cash Flow vs Profit: Difference
 Forecasting Strategies
 Software and Apps: Job Costing, Time Tracking
 Structuring

3. WHY DO YOU NEED TO
UNDERSTAND YOUR
FINANCIALS?
• Legally
• http://asic.gov.au/for-business/running-a-company/company-officeholder-duties/your-
company-and-the-law/
• Morally
• Ethically

4. UNDERSTANDING FINANCIAL
STATEMENTS
• Profit and Loss statements
• Balance Sheet
• Cash Flow
• Budgeting: Actuals vs Targets
• Key Performance Indicators (KPIs)

5. CASE STUDY: BOB THE PLUMBER
• Bob Plumbing Products was founded in 2012
• Bob is an importer of plumbing products and distributes plumbing
products to building sites, major projects and hardware stores
• Bob believes his business is doing extremely well

6. CASE STUDY: BOB’S FINANCIALS
Profit & Loss 2015 2016
Revenue 3,500,000 4,000,000
Gross Margin 1,050,000 1,200,000
Overheads 675,000 800,000
EBIT 375,000 400,000
Interest 116,590 136,348
Tax 77,523 75,141
Net Profit 180,887 188,511
Balance Sheet 2015 2016
Cash & Equivalents 100,000 90,000
Accounts Receivable 671,233 952,652
Inventory 1,033,690 1,624,854
Current Asset 1,804,923 2,667,506
Fixed Assets 850,000 950,000
Total Assets 2,654,923 3,617,506
Accounts Payable 402,855 555,780
Short term debt 501,974 755,402
Current Liabilities 904,829 1,311,182
Long term debt 900,000 1,285,343
Total Laibilities 1,804,829 2,596,525
Share Capital 200,100 200,100
Retained Earnings 649,994 820,881
Total Liabs & Equity 2,654,923 3,617,506

7. CASE STUDY: RATE BOB’S COMPANY
• Rate out of 1 -10 the financial performance
• Rate from 1-10 the cash flow position of the business

8. FINANCIAL
PERFORMANCE

9. FINANCIAL PERFORMANCE
Targets not achieved:
Activity
Activity ratio: Annualised Revenue/Total Invested Capital
Asset Usage
Asset Turnover: Annualised Revenue/Total Assets
Working Capital Absorption: (Accounts Receivable + Inventory + WIP –
Accounts Payable) / Annualised Revenue
Liquidity
Quick Ratio: (Cash & Equivalents + Accounts Receivable) / Total Current
Liabilities
Capital
Net Variable Cash Flow: (Annualised Revenue – Annualised Variable
COS – Annualised Variable Exp – Operating Working Capital) /
Annualised Revenue

10. 2016 CASH FLOW

11. WORKING CAPITAL

12. THE RESULTS - EXPLAINED
• Bob was funding his inventory purchases with debt
• He was not selling his inventory fast enough and this was leaving him with a major
cashflow problem
• Bob also was holding a lot of money in debtors
• Bob was forced to call an administrator because he could no longer meet his
commitments

13. HOW TO AVOID BOB’S MISTAKES
• Regular meetings to discuss your financial performance
• Using an accountant or adviser to explain the numbers
• Using other predictive software to analyse the results
• Structuring your business to mitigate risk in case of an emergency

14. FINANCIAL YEAR END PREPARATION
Tax Planning – Year End
• Bookkeeping: coding and reconciliations completed at 30 June
• PAYG Payment Summaries & Contractor Payments Reports
• Performance overview & tax estimate for 2016
• Strategies to minimise tax for current FY

15. FINANCIAL YEAR END PREPARATION
Tax Planning – 2017 Financial Year
• Budget for 2017
• Establish if financing may be required with accountant/bank manager
• Total wages – payroll tax? ($1.1 million in QLD)
• Review Insurances & Salaries (is payroll tax applicable?)

16. ACCOUNTING SOFTWARE

17. APPLICATIONS: ADD-ONS

18. ADVANTAGES OF USING AN ADD-
ON/APPLICATION:
Systemise Your Business
Save Time
Track Job-Costing
Track Key Performance Indicators (KPIs) in Detail

19. STRUCTURING
TO MINIMISE TAX
Company vs. Trust Structure

20. TAX MINIMISATION:
TRUST EXAMPLE
Tradies-R-Us makes $300,000 Taxable
Profit. Trades as a Trust.
Profit Distributed to 2 Beneficiaries.
Tradies R Us Pty Ltd (Trustee)
Director 1
Director 1 (Beneficiary)
$150,000 Distribution
Tax: $46,132
Wife (Beneficiary)
$150,000 Distribution
Tax: $46,132
Trust
Tax paid by Beneficiaries at
personal marginal tax rates.
Total tax payable: $92,264
Family Trust (Corporate Trustee)
- All profits distributed
- Must be taxed at the beneficiaries’ marginal tax rate

21. TAX MINIMISATION:
COMPANY EXAMPLE
Tradies-R-Us makes $300,000 Taxable Profit.
Trades as a Company.
Director’s wage: $90,000 ($22,732 tax payable)
Admin’s wage: $30,000 ($2,397 tax payable)
Tax paid Director on his wage.
Company tax: @ 28.5% = $51,300
Total tax payable: $76,429
Tradies R Us Pty Ltd
(Trustee)
Director 1
Company Retains Profits
Tax Profit (post Director's wage)
$180,000
Tax: $51,300
Admin Wage: $30,000
Tax: $2,397
Director's Wage: $90,000
Tax: $22,732
Company
Retain profits in the company (28.5 cents)
Dividends can be paid to shareholders out of retained profits

22. TAX MINIMISATION:
STRUCTURES
In the example, company structure results in $15,835 in tax savings.
Other Considerations:
• Risk mitigation
• Growth Plans
• Ease of use
• Exit Strategy

23. 2 THINGS ARE CERTAIN IN
LIFE:
TAX & DEATH

24. QUESTIONS
1. Do you have a good understanding of your financials?
2. Do you know what questions to ask your adviser?
3. Have you thought about what you want out of your adviser?